United States District Court, D. South Dakota, Southern Division
MEMORANDUM OPINION AND ORDER DENYING MOTION TO
DISMISS COUNTS I, II AND III OF THE AMENDED
Lawrence L. Piersol United States District Judge
filed a four-count complaint against Defendants alleging
misappropriation of trade secrets under federal law,
misappropriation of trade secrets under state law, breach of
confidentiality agreement by defendant Jerry Baker, and
tortious interference with contract by defendant Nelson
Engineering, Inc. (Doc. 1.) Defendants filed an amended
counterclaim against Plaintiffs for defamation, tortious
interference with business relationships, tortious
interference with contractual rights and declaratory relief.
moved to dismiss three counts of Defendants' amended
counterclaim for failure to state a claim pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 27.)
The motion has been fully briefed. For the following reasons,
Plaintiffs' motion to dismiss will be denied.
facts will be stated in the light most favorable to
Defendants, the non-moving parties. Plaintiffs, POET, LLC and
POET Research, Inc. (POET), are involved with ethanol
production. Defendant Nelson Engineering, Inc. (Nelson) is
involved in certain aspects of the ethanol industry as a
consulting engineering company. From 2004 to 2008, defendant
Jerry Baker (Baker) was employed by POET Plant Management,
f/k/a Broin Companies. Baker signed a non-disclosure, or
confidentiality, agreement with POET Plant Management.
Baker was working as an engineering manager for POET, POET
began using technology called "Delayed Dilution
Technology" (DD) in its ethanol plants.
claims that its DD technology is a confidential trade secret.
left POET and, after complying with his two-year
non-competition agreement with POET, he went to work for
Nelson in 2010. Baker and Nelson developed a technology
called "Hydrolysis Utilization" ("HU").
POET asserts that HU technology is exactly like DD
assert that their HU technology is a confidential trade
secret. Defendants disclosed the details of HU to Glacial
Lakes Energy pursuant to a confidentiality and non-disclosure
agreement (NDA) with Glacial Lakes. A former Glacial Lakes
employee now works at a POET-affiliated ethanol plant. POET
claims that the former Glacial Lakes employee told POET that
Defendants' HU technology is the same as POET's DD
technology. In count III of their amended counterclaim,
Defendants allege that POET interfered with their rights
under the Glacial Lakes confidentiality agreement by
extracting information from the former Glacial Lakes employee
about Defendants' protected HU technology. Doc. 21 ¶
after POET filed this lawsuit against Defendants for
misappropriation of trade secrets, POET published the
following statement on its website:
POET yesterday filed a lawsuit in U.S. District Court of
Sioux Falls, S.D. alleging that the Sioux Falls-based company
Nelson Engineering has misappropriated POET's trade
secrets. The lawsuit is captioned "POET, LLC and POET
Research, Inc. v. Nelson Engineering and Jerry Baker, "
Case No. CIV 17-4029.
The trade secret in question is known at POET as
"Delayed Dilution, " a technology that allows POET
to achieve increased ethanol production from each fermenter
in the process.
"POET has invested significant time and money into
developing proprietary technology and processes that
contribute to our long-standing success as an industry
leader, " said POET President and COO Jeff Lautt.
"We will do whatever necessary to protect our
intellectual property from unauthorized use by others."
Doc. 21 ¶ 3. Count I of Defendants' amended
counterclaim is a defamation claim based on POET's
4. Separate and apart from merely stating the fact that a
lawsuit has been filed, the above website statement, in
particular the quotation from Mr. Lautt in the context of the
preceding two paragraphs, states or implies that Defendants
misappropriated or used without authorization POET's
trade secrets, which statement or implication is untrue and
damaging to Defendants' business reputation.
5. The above-quoted comments of POET's President and
Chief Operating Officer, Jeff Lautt, state or imply that
Defendants stole, misappropriated, or used without
authorization POET's proprietary technology, proprietary
processes, or intellectual property, which comments and
implication are untrue and injurious to Defendants'
business or occupation.
6. Defendants' Hydrolysis Utilization technology
("HU") was developed wholly independently of
POET's trade secrets or DD, and Defendants did not
misappropriate or use POET's trade secrets or DD.
7. POET knows that DD technology is not novel, confidential,
proprietary, or a trade secret, and POET knows Defendants did
not misappropriate or use without authorization POET's
trade secrets or DD, yet POET published the above website
comments concerning Defendants for improper purposes, with
malice, and in bad faith.
8. POET's website statements have damaged Defendants,
Defendants' business reputations, and Defendants'
relationships with customers and ...